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tv   Squawk Box  CNBC  February 22, 2012 6:00am-9:00am EST

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good morning and welcome to "squawk box" here on cnbc. i'm andrew sorkin filling in for becky quick. i don't know if anyone's going to get that joke except for us around the table. it's nice to see everybody here. >> nice to see you. >> i don't know if we're going to have an opportunity to talk about it, but tax rate, corporate tax rate, 35% to 28%, that's huge. >> it's not low enough. >> it's not low enough? >> you're going to get rid of all the deductions and stay at 28%. >> i knew you'd have a problem. >> it's revenue poz tish which means it will be raising taxes. >> it will be raises taxes. >> $250 billion over ten years. >> what i like is this guy trying to get re-elected. oil's 106. let's cut out all the deductions for oil and gas. we've already said no to key stone. let's really rank -- you know, let's get $5 gasoline and see how that works for gdp,
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unemployment, my re-election process. brilliant. >> you think it's completely bogus. >> which number? >> the 28% number. also you're going to start taxing -- >> we have talked -- >> why can't you go like 25% like the rest of the world. >> 28 for personal. >> you're basically going to raise a lot more -- i have argued in the past, andrew. it's an outlier argument. i have argued that corporation shouldn't pay taxes anyway. shareholders pay taxes, employees pay taxes. we have to compete globally. >> i think corporations should pay taxes. >> there are people who made the point that the really competitive globally since all
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employees pay taxes, since -- >> the look that i'm making is reflective of the fact that there's an argument among some that no matter what the rate, it will never be low enough and that this is really not about lowering the rate to make the country competitive and raising the right amount of revenue. it's really about lowering the rate. >> here's the thing. >> but it is higher taxes. 28% is higher taxes if you strip out everything because they're not -- >> the tax rate is much low sneer right. >> so you're hurting -- it's not helping the corporate environment. people think it's pretty good. >> we've talked about this forever. the idea of lowering the rate and getting it low enough, ultimately duct make sense in the context of the in fact the effective rate is lower than that. i think we're going to get down to a rate that's lower. no corporation is -- >> it's a step in the right direction, which is to make it an even playing field. >> but you want to make it an
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even playing field. you dome want anything going offshore where it's lower. . it's like a state that brings in other businesses. if it's an average 25 -- why gh not go to 25%? >> i was hoping you'd say it's a step in the right direction and we need these three tweaks and we'll be there. >> we're going to argue this. you know that everything that is proposed by the obama administration between now an november is going to be setting up different arguments they can make to frame the election. that's all this is at this point anyway. but if you want to hear my take on this, i wouldn't be raising how difficult it is globally at this point. revenue raising $250 billion over ten years is raising tax on corporations. if you thing it's the right thing, say it's the right thing.
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i don't know that it's the right thing. >> even hank paulson said you need to lower the rate but you ultimately have to be raising revenue. the goal has to be to lower the rate, as you said, so you'll raise the amount of revenue generated. >> i don't think that you would have paulson and a lot of republicans saying you should raise taxes on businesses by $250 billion over the next ten years. >> ultimately some businesses are going to -- >> not necessarily businesses. it can be individuals. we should be at 25. we should be doing all we can. the economy is made up of small and large businesses. it's not made up of o the government. it isn't. what we want to do to compete globably is to have the leanest, meanest, we want to export -- >> i'm not telling you this plan is a panacea. i'm telling you this plan has to be considered at least a step in the right direction to get the conversation moving. >> and i think especially to get to the idea where you don't have some corporations that aring
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less than 5% and some paying over 28%. thing you need to get to the point where you strip away a lot of the reductions. >> becky, you're right in that part of the problem that's going to be is the corporation paying 5% is going to be paying more, so its's not going to fly for them. and some of those are the biggest corporations in the country. >> luckily you're going to have some policy makers who don't think it's a good idea. >> would you thing it would be okay if it was 25%? >> if you're telling me tomorrow morning when we wake up it would be 25%. you would take it. >> 25 i'd do. >> 25 you'd do. >> what will that do to the revenue? >> i don't know that -- >> it won't raise it. i don't thing you need to raise taxes on business, not with
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what's on the raise and the affordable care act. >> you don't -- >> what can't you hear. >> why are you looking at me like i'm thick. i don't think we should be raising taxes. how do you know you don't raise more revenue by making businesses more profitable, by raising the amount they're able to make. they already pay a lot of tax. >> because even mr. helicopter ben bernanke will tell you that ultimately the rate for every dollar cut you do not get a dollar back. >> maybe you don't get a dollar back -- >> you don't. >> we're back to arguing about this. would someone put some freakin' wheaties in your cereal? let's move on. >> wow. >> this is a big deal. we should focus on the markets because that was a key part of the story too. the dow closed higher yesterday. it did fall short on the closing level of the 13,000, but, of course, it passed that level
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during the course of the day, so we're looking at -- waiting for the first time to cross 13,000 for the close in nearly four years. you can see they're a little bit weaker. the s&p is down. it 150es percent of its closing high. we point out our knew fair value board. as we see it stand, the dow white gold open by 0.6%. the s&p would go down by 0.13%. the last column shows the implied percentage change. >> what did do you to her yesterday? she's a successful -- >> she turned down her salary. >> we had a guest host on the set who raised some issues and i felt -- >> why don't you put this on
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wapner. >> there was a follow-up unp necessary at the time. given the direction the interview was going. >> god forbid she's successful and raises herself up. how many women are like sally craw check. i wish there were more. i wouldn't look at her and say, geez, why did you make all that money and who did you -- we're back to the -- did you take it out of someone else's? >> that was not the unp. >> i was on the phone. i had nothing to do with it. >> thank you. >> hold on. >> i was doing a walmart piece. >> she's making excuses. >> i was on the phone. dmoij what the unp was. >> the unp that was put on the table was in this day and age about the confidence on wall street, whether the type of golden parachute she ultimately received, what is the right kind of thing? >> i don't know what the unp was. >> a panacea here. are you capping -- what's your
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cap on corporate compensation? i hope you have a good one. is it low enough for you? >> i don't thing anybody should be paying more than $39,000 a year. >> but $500,000 should be the cap. for journalists, is it still there at 500? >> 500's my budget for the helicopter and then i've got deal with jeeves. >> all this from a guy who wings his way into cnc every morning. >> aaye-yi-yi. let's get to the global market report. ross, how is it fairing in europe right now? >> we hit the session low ahead of the u.s. open. pmi numbers are lower than we wish. below 50. we're expecting it to be above that. still showing contraction versus
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expansion. ahead of the market, they said we've seen no job creation in france and germany in february and growth continuing to slow. so stocks are down. xetra dax is down. the other key bit of news today, minutes from the bank of england, two members, adam posen and dave wants more. as a result, we saw sterling slip about a cent against a dollar. gilt's got a bit of a kick. we've continued to see multimanufacture month lows. they hit above 1.80 this morning. euro/yen also stronger. euro/dollar a little week at 132.25. keep your eyes on the auto bond yields. 5.49% this morning and tenure bunds streaking a little bit
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low. so since woe got agreement, greece stocks are down. back to you guys. >> thanks so much. in corporate news this morning -- we're going to get out of the taxes into the corporate news. dell's forth quarter earnings missing the street by a penny. consensus coming ahead. but it's the guidants that have them a bit nervous. below wall street's expectations stoking fears that the p.c. industry has not fully emerged from its downturn. we're going to be talking more about dell with an industry analyst at 6:30 a.m. eastern. >> who actually downgraded dell but didn't expect it, i don't thing to miss. there's lower rev new from the public. >> is that an operations problem, dell problem or tech problem? cisco came in with big numbers. >> right.
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no. it depends on operations and sub con traerkts in thailand, right? >> it's a global world. you have to get a right tax rate for the global world. >> ford is pouring $3.8 billion into its global pension plan this year. that's more than doubling its cash contribution. the automaker will invest its planned assets more heavily in bonds as it moves to a shaky market. ford says it's expected that its pension assets will match future benefit obligations in the next couple of years. >> let's get a check on the u.s. market this morning. joining us isevery. he's a chief investment strategist at raymond james. 13,000 for the dow, which is a psych logically important number. is this a situation where if we cross that line for the s&p, you
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thing that this is good news for them? >> i do. i think it's good news. i do thing the rise in the past few weeks has an unnatural feel to it. a little cautious right here looking for a stall or pullback, but longer term, we have been up like 36 sessions without a 1% downside day. and the history of that is pretty constructive of the 12 times it's occurred in the past. i'm still constructing on stock, a little bit cautious near term. >> when you say you think it's had a little bit of a strarj feel to it, just an unnatural feel over these last few weeks, do you think the market is just ignoring any bad news at this point? >> yeah, the market has been ig new york any bad news, and that is good news, at least in the intermediate to longer term
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scheme of things. earnings are going to get more difficult this year because they were so good last year. thank's a potential headwind, but nefrms the world is profoundly underinvested in u.s. equity both in europe as well as in the states. the endowment funds are notionally 12% long and they can't get to their mandated returns of 7%, 8%, 9%ing in ten-year treasuries. thing when it becomes apparent we're not slipping into another recession, that you'll see a massive shift out of fixed income and into u.s. equities. >> when you say massive shift, what kanld of numbers are you talking about? >> anybody that asks me that at the end of last year or any year, i always say i expect the market to be up point 4% this year. that has been the historic return since 1926.
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so you're going to get high s&p returns or low ones. coupled with that, i think it presents a pretty compelling story for u.s. equities in the 2012. >> although we've seen huge gains already, jeffrey. i mean we'd have to really -- if you're just talking about seeing, let's say, 8% kbans, maybe you've seen 8% gains this year. >> the equity markets can sur priechlz they can surprise on the upside, which is what they've done. do you remember going into the new year, the bear booze that came out and told you the first half of 2012 was going to be bad and they expected the back half of 2012 to g good? so i'm pretty optimistic. >> if we watched what's going on in china, there were concerns there.
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that's a sig gnat not that china is slowing down but as andrew sorkin points out, the world is slowing down. does that worry you? >> no, that does not worry me. china has put into place a policy over the years to more of an inward demand, domestic economy. you saw brazil do that in 2005/2006. they raised interest rates. their currency appreciated. i think china over the long run sees that nay need to create domestic demand and not export driven demand and think that's exactly the path they're on. >> great talking with you. >> you bet. >> thanks. coming up, john harwood is going to join us live from washington with some details on the president's proposed corporate tax overhaul. first, though, linsanity returns to new york. jeremy lin asked people watching in record numbers, the team reports that its last two games
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were the highest rated season events on msg since the network began, and they began tracking household ratings way back in the 1988/1999 season. as we head to break, check out the global market headline. while some fiber ads use super models, metamucil uses super hard working psyllium fiber, which gels to remove unsexy waste and reduce cholesterol.
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welcome back to "squawk box" on this wednesday morning. let's take look at the futures. it's slightly down. it's getting a little bit worse. dow would open up about 8 points lower. you can look there at our new implied -- just off marginally. that was what i was thinking about. making headlines this morning, johnson & johnson william wheldon is going to be steling down from his post in april. the company has been dealing with a series of recalls. >> the other woman, i thought had the inside track.
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i forget her track. recently as saturday she thought it could be her. so this is a bit of a -- >> they've had some struggles. >> it's got something do with whatever the billion dollars -- >> on the hip stuff that and other recalls. >> didn't we have weldon on? >> right before he was -- right, right. now we've got to work on the new guy. >> we've got to make sure we're not like "sports illustrated." remember the cover of "sports illustrated"? >> kind of were. kate upton is on the cover. she's not peaked. >> she's only 19. >> she's not your cup of tea though, really, right? >> not really. >> like everyone else is. i'm not sure what -- right? i mean you've -- gwyneth, natali
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natalie. >> when we come back, we'll get to the story behind the tech giant's quarter warning. first we have a program note. on monday warren buffett is going to answer your unps. he's going to be live on "squawk box." he's got his annual report on friday. so you can read that report, e-mail unps about that or anything else you're thinking. you can e-mail him a at #askwarren. or you can tweet. that starts monday, 6:00 a.m. eastern time. right now let's take a look at yesterday's winners and losers.
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pushing back toward 13,000 very rapidly. >> i think the more this the world can see that the end of the world isn't here, maybe they'll see they can dip their feet in the water. >> for your the first time since may 20th, the dow is above 13,000. >>. is this new company trying to be the disney of china? >> for sure. they want to have their own brand of entertainment combination. [ male announcer ] we know you don't wait until the end of the quarter to think about your money... ♪ ...that right now, you want to know where you are, and where you'd like to be. we know you'd like to see the same information your advisor does so you can get a deeper understanding of what's going on with your portfolio. we know all this because we asked you, and what we heard helped us create pnc wealth insight, a smarter way to work with your pnc advisor, so you can make better decisions and live achievement.
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sing it. president obama belting out several bars of "sweet home chicago" last night. he was attending in performance at the white house. today the president's administration will propose a corporate tax overhaul. and we have the results of the gop presidential race, which i'm interested in. i've figured out everything that we've seen between now and november is sort of electioneering in my view, john. this isn't going to see any legislative action obviously. both sides are going to present their view of how corporations should be taxed and then we'll all decide in november which way to go. how do you read this thing? what was in here -- >> joe, i agree with that -- >> what's in political? hit the corporations a little harder, get rid of some of the deductions that rich oil and gas companies get, et cetera, et cetera?
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>> well, he's trying to respond to the very steady complaints by corporate leaders and by republicans and some democrats that the united states corpse rate is uncompetitively high in connection with the rest of the world, but also trying to balance his concern about deficits. so they start a process. they propose a corporate tax reform that's revenue neutral, meaning some get hit for others getting the benefit of that rate. controversially, it's difficult -- >> it's $250 billion over ten years. it's not revenue-neutral. it raises revenue. >> no, i don't believe so. that's been tim geithner's mantra from the beginning. joe, i wouldn't dismiss it only as electioneering because you've got dave camp saying corporate rates zbhould to 25%. you've got this proposal from the administration. it's a step in the process. it's not going to conclude this year, so, yes, it will be
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brought up in the campaign, but these kind of proposals take time. remember, the bush treasury talked about cutting the corporate tax rate. charlie rang whole was then chairman of the ways & means committee talked about it. i think you have to talk about it whether obama is reelect order a republican is in. i think the odds are higher that it's going to happen in the next couple of years because of this proposal. >> what did the poll find out for the republican race now? >> the poll showing romney getting more traction in michigan. hecht's up 37-35 over santorum. remember, santorum had taken the lead in michigan, which is romney's native state. the attacks on mitt romney have taken a toll. gingrich and paul far behind. and that tells you that romney has got a shot to come back and win both of these next tuesday. raises the stakes for the debate
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tonight which takes place in arizona. critical for santorum to try to regain some momentum in that debate and also for newt gingrich to get back in the game because he's not giving up either. >> who does gingrich attack? does he go after santorum because he has the momentum or does he go afl romney because he seems to be the forerunner from most people's perspective? >> i think he's got to do both. gingrich has gone down. votes have gone to santorum. but this race still revolves around mitt romney, who is the punitive front-runner, the person that most people in republican politics believe and in the obama white house believe will eventually end up with the nomination. so you've got to play off of mitt romney and make a contrast there. they're competing, santorum and gingrich, to be the alternative. part of it's also showing that you can effective will go after mitt romney. >> john, there are a number of
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report this morning that romney is blowing through cash, i mean just spending money. i don't want to suggest wildly, but spending it to the point where he could be walking into the fall if he is the presumptive nominee or is the nominee without the fire power that he would want. is there any sense that they're going to be theory scaling back some of this spending or is there a strategy involved here that is different than we thinksome. >> i don't think they're going to scale back the spending as lodge as there's a mortal threat to their nomination, which is there is right now. they've got to take out rick santorum and newt gingrich. they don't have this thing locked up. the beauty of the super pacs, andrew, is that if you've got a small number of wealthy donors -- part of romney's problem is he has a lot of high donors who max out quickly in the donations to the campaign, which, of course, are limited. super pacs are not limited. so if you have a small number of people who are willing to right 1 million dollar checks or $5
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million or $10 million checks like sheldon adelson is for newt gingrich, you can instandly make up for the fact that you burn through cash. now, the super pacs aren't the same as the campaign. they maintain a legal distance from one another, but they're pretty closely connected in terms of their mission, in terms of their understanding of the political terrain. so i would. think that that's mitt romney's number one problem at this moment. he's got to make sure that he wins michigan. that's priority number one. he'll spend whatever he has to do to do that. >> how much do you believe gallup and their unemployment numbers? i was reading that they track the numbers. they do the same kind of survey as the bls survey. >> mm-hmm. >> and while it might not be -- they may measure more of a change, they said that ton employment rate went from 8.3% in mid-january back to 9%. >> no. i thought he said it was 9% is
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what he expected next. >> yeah, but that's because they've done the mid-february -- this is not what he said when he was on. this is what i read over the weekend. >> oh. >> maybe i can find the article for you. but already that that march report is going to -- when you're talking about it, is going to -- because of the survey they already did is going to show a backup. gallup has all kinds of numbers that don't jive with some of the other ones, john, on the president's approval rating and what's going to happen in november too. who do we believe on this? >> gallup is a reputable voting firm but they put out a lot of data and take a lot of flat, especially because of the fluctuations. they've got tracking surveys and full surveys. i think on unemployment, i would go with bls. >> they do the same type of survey. >> i understand, i understand, but i don't think the markets are going to react to a gallup survey the way they will the
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labor department. i agree with you. look. everybody in the administration and the political community knows that they're vulnerable to a snapback in that unemployment rate and a shift in the mood. most of the signs are good. momentum seems to be building for the recovery. but nothing's set and we've seen from the disappointments the obama white house has experienced over the last couple of years that, you know, nobody is assuming anything about where that rate's going to be. >> now we've got oil -- i don't know where gasoline prices are going. oil, to some extent we hear murmurings about here, there, everywhere. >> to me they're still putting same amount of oils out in the market but they're selling it to someone else. >> something about israel and -- >> those are big uncertainties. of course, just the spike-up that you get in the summertime which, of course, obama ran during that experience in 2008,
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he caught some flack for it. i asked hum given his energy policy whether or not higher gas prices, oil prices were a good thing because they would help spur the move to alternative energy, and his comment was, i'd rather see a more gradual adjustment, but we could come out in a better place. republicans attacked him for wanting higher gas prices, and republicans are doing exactly the same thing right now. rick santorum said the other day, because of obama's what he called radical environmental agenda, he wants higher gas prices. that's a vulnerability for the administration. >> i think santorum says say tan actually prefers higher oil prices too and he could be behind some of this. >> i think you're not liking santorum, joe. >> i like when people talk about say tan, i don't know. it gives us things to talk about, doesn't it? some of my scariest meeshs involve say tan, the idea that
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maybe say tan -- i mean it's pretty scary because that girl, she never spoke any of those languages, right? she suddenly she's using ancient languages she can speak. that means maybe there really is a say tan, john. >> depending on your point of views, some of your viewers might be looking at the tv and seeing say tan in some ing said me and you. nobody thinks becky is satan. >> no, that's true. but i saw w. called satan again and again. the satan word gets thrown around a lot. >> it's ash wednesday. give up something for lent. >> ash wednesday. is that the beginning of lent? >> yeah. you've about got to give something up. >> i am. >> what are you giving up? >> dieting. >> what a sacrifice. >> my daughter said hates to be
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something you enjoy, you want. >> that's true. >> pork rinds. a programming note. treasury secretary tim geithner is going to join our steve liesman for an exclusive interview right here on "squawk." that's friday at 8:00. we get that from viewers all the time, lies-man. friday at 8:30. >> let's get to the market. joining us is ben lichtenstein of auto i know you focus on what happens with the technicals. why don't you talk about yesterday's trading with the s&p. within one point of the closing high of last year, what do you make of it? >> i think it's a continuation of the pattern we saw. we came on and talked about how trending markets usually develop some sort of characteristics and that's what we see right now.
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the focus is on the dollar and the crude oil. it made it up there in the overnight session but for the most part hasn't really derailed the strong energy we're seeing to the upside. 13,000 in the dow yesterday. so, again, it seems to be, you know, higher highs and higher lows as i said a while ago and that definitely continues to be the pattern right now. another thing that we're noticing is the yen has had a huge couple of weeks to the downside right now. there was some intervention in that market a few weeks ago but we're seeing a continuation to the downside. for the most part the dollar is hanging in there. again, a lost traders are used to associating with weakness in the dollar and strength in the stock market. again, considering all the uncertainty in europe, considering the uncertainty in the yen, you look at activity in the bonds, crude oil, i mean there's money moving around all even the place. i think some of it's coming out of the other major markets i talked about into the dollar, again, having seen the strong
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market activity and dollar kind of holding in there right around this 80 even level for the most part, a little bit below that, but still holding "i" own for the most part. >> ben, thank you very much. it's good talking with you. >> thank you. we're going to take a quick break. the street's reaction to dell. that's after the break. that's going to be coming right after this. [ horn honks ]
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dell out with fourth quarter results. jason nolan follows dell for robert w. baird & kpaechlt you downgraded it. it was not necessarily that dell was going to miss the quarter, right, jayson, but it did miss a quarter. you were right, but were you right about their operation? >> well, the quarter was in line. revenue and earnings came in with street expectations. >> so latea penny late, right, was it a penny below? >> 51, 52, that's right. a little light in line with our model. it was up pretty light. >> if there was anything to point fingers at, and you read the commentary today, it's downbeat guidants, whatever, a lot of talk about thailand. are these things that had do with flooding or public sector
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weakness, or are there things that are more concerning about dell's actual operation? >> those are two of the big ones. the margin was a little light on the quarter, the revenue guidants was a little disappointing but the hardware problems in thailand are causing an issue. dell has a lot of skpoerser to public spending in the western u.s. and europe. that was weak. they also rode off old generation cell phones, which hurt them on the quarter. >> people have made money, and michael dell, you know, people want to believe that story, they'll pull back a little. is it time to add to positions? >> i still see the risk reward is fairly balanced. the stock has been pretty good over the last 12 hours compared to others. they're in kind of a long-term transition here, refocussing the business to higher growth, higher march in categories like software and networking and storage and services. it's going to take some time.
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the model has been peaking. i think it's going to be trading for the next couple of quarters here at least. >> so can mas macho, apple y dell. >> bowl companies have a chance. low cost structure businesses have a chance in that world, and hp is the largest if not one of the largest i.t. companies in the world. so you can't rule them out. >> that was which -- which stock is more macho? i mean is -- did you say which you'd rather by, hewlett-packard or dell? >> i don't know if h.p. or dell is very macho. >> which is girlier. >> what is macho then? >> apple? >> apple's the one.
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muy macho. >> maybe ibm muy macho. >> larry's macho. whose boat is bigger. it's interesting. it used to be the perennial race with the p.c. makers but with apple it's all thrown into flux. you don't think p. krchlt race. you don't know if you want to be in that business anymore, though it is still going. >> it is. it looks like a mac book air. thinner, instant on, touchscreen. the p.c.'s not going away. it's not more of a post-p.c. world. it's a p.c.-plus world. it's a mature mark and there's pricing measure and it's not what it was. >> do they start paying dividends if it's a mature
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market at some point? >> dell's free cash equity is mid teens percentage. enterprise value, even higher. but some of that cash is overseas and they're using some of it for m & a. free cash flow is very impressive for dell i wouldn't do a dividend now since it's going be taxed at almost 45%. it's going to triple in the next year or two. so forget it. i'm not giving you any dividend. >> about what 25%? >> it can't. the way it's going now because the ordinary income will be 39.6%. you add the investment chance -- i'm sorry, the journal calls it obama care. we mean affordable care. >> i think that's imposturing? >> who's posturing? >> i think the journal is posturing and i think the obama administration is posturing on its side. >> there's nothing that's law, that's going to happen.
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unless do you something. >> unless you do something. but i think that's posturing. >> that's where it's going to go given the current law. >> it's going be -- >> but the current law, taxes are going go up on everybody. given the current law, if everything goes the way it's plan, when the bush tax cut expires it's going to be all americans. >> if the president is re-elected his proposal is to raise the dividend tax rate to the ordinary income, 39.6%. >> a lot of people think that's in negotiation. >> everyone thinks that. >> the deductions, you know, maybe the supreme court doesn't allow obama care to go. >> we will debate some of those numbers. >> but i wouldn't pay any. i don't want them, and i wouldn't pay any. >> it's my interview. i can say good-bye to jayson. jayson, thank you. >> can you speak in another
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language? >> if you were to possess my body, thing i could. >> ew. >> still ahead, the author of "standing on the sun" is going to tell us how emerging economic powerhouses are going to change the face of business as we know it when we return. ♪
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[ kareem ] i was fascinated by balsa wood airplanes since i was a kid. [ mike ] i always wondered how did an airplane get in the air. at ge aviation, we build jet engines. we lift people up off the ground to 35 thousand feet. these engines are built by hand with very precise assembly techniques. [ mike ] it's gonna fly people around the world. safely and better than it's ever done before. it would be a real treat to hear this monster fire up. [ jaronda ] i think a lot of people, when they look at a jet engine, they see a big hunk of metal. but when i look at it, i see seth, mark, tom, and people like that who work on engines every day. [ tom ] i would love to see this thing fly. [ kareem ] it's a dream, honestly. there it is. oh, wow. that's so cool! yeah, that was awesome! [ cheering ] [ tom ] i wanna see that again. ♪
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back on this wednesday morning. it's like a cocktail party around here. our nest guest is one of
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america's top innovator, he has an interesting take on how u.s. capitalism is joining us. joining us, chris meyer, author of the new book "standing on sun." which seems like it could be hot, to be standing on the sun. >> yeah. we tried to title it something that said perspective, to understand the way the solar system works, it's hard to see the change in the system if the inside. >> so theyed is we got to get out. >> got to get out, look at capitalism as a system, global capitalism that evolves over time. it's not just the way the u.s. is working. >> is the system working? >> system is working. if you go to not just the brick countries, but the so-called next 11, the mexicos, and bangladesh, vietnam, you see busy people creating real value for their populations, through entrepreneurship and capitalism. >> you say that you, in the u.s., competition is like a religion. more people believe in it than practice it. what do you mean by that? >> we have a chapter in the book
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called psuedo competition. it's how you get efficient resource aloation and innovation. the mobile industry, they each spend $35 per subscriber on advertising. no market share is changing hands. look at air-tel, they spend, their customer spends $15 per year with them on service. so our companies spend twice on advertising what the average indian is paying for service and they're managing -- >> part of the argument, the yuntd lying theme in the book, a question mark around capitalism, i would suggest. is that -- >> no, i don't think so. >> that's the wrong take-away? >> that's the wrong take-away. >> okay. capitalism survived the transition from the agricultural economy to the industrial economy in the 19th century. it's going to survive the
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transition, the information economy in the 21st. it's not going to happen first in the united states any more than it happened first in england. it was the emerging economy of the 19th century, the united states, that invented industrial society around that same technology. that same process is going on in the youthful, digital native society. >> we're having a debate this morning about corporate taxes. >> yeah. >> and the ultimate impact that the corporate tax rate in the u.s. is going to have and trying to find a tax rate that brings in additional revenue to the u.s. so that it helps the country. but at the same time, makes us competitive globally and that seems to be the conundrum. >> well, you know -- >> do you have an answer? >> i have an observation. which is -- >> standing on the sun, do you have an answer? >> ge didn't pay taxes. >> they did pay taxes. there's articles that say they haven't, but they did. >> they do pay some u.s. taxes, but they pay a lot in foreign
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taxes, which is part of the whole reason and a lot of the loss carry-forwards they had were from the huge losses from ge capital in 2008. >> if you look at their healthy imagination business they're doing business in india in ways that are standing on the sun. they are developing a $500 cardiograph. not a $5,000 cardiograph. and part of this indian-developed machine is sold in western europe, and they're making money on it. >> chris meyer, "standing on the sun" thank you. when we come back, dow 13,000 is the psychologically important mark just the beginning for the bulls? and later this morning, one of the most powerful women on wall street, meredith whitney walks on to our set to guest host at 8 :00 a.m., eastern. fidelity. now you don't have to go to a bank to get the things you want from a bank.
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the dow cracks 13,000, though only briefly. the industrial average still sitting at multiyear highs, we ask two market-watchers how they're putting your money to work right now. regulation nation, why what washington is doing could be hurting american business opportunities. the "economist" magazine's chief tradinger is here. the second hour of "squawk box" begins right now. good morning, everybody, welcome back to "squawk box" here on cnbc, i'm becky quick along with joe kernen and andrew ross sorkin. among the top stories this
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morning, some european budget worries, this time the focus is not on greece, but hungary, the eu says it wants to with hold $655 million for hungary because the country hasn't done to bring down its deficit. ford is putting $3.8 billion into the global pension plan to try to protect against potential shortfalls and will be investing the fund's assets into bonds. france's peugeuot is in alliance talks with another automaker. it won't say who it is, but several media reports say it's general motors. peugeuot is europe's second-largest automaker. the dow futures are down by about 21 points, the s&p futures off by 3.5. and check out our new futures board which shows you the implied percentage change at the open. right now, .25% down. the dow futures would be down by
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0.16%. >> and the obama administration set to release its corporate tax plan this morning. it will propose lowering the current 35% corporate tax rate to 28%. but taxes overall would likely rise, as the administration wants to eliminate loopholes and the administration proposes a minimum tax on the overseas profits of american companies and this is creating a big debate. both in the country and at this table. >> now to the latest out of greece, lawmakers start debating emergency legislation to improve the company private debt relief deal. an anti-austerity rally outside parliament. greece secured a second bailout in exchange for new austerity measures. but people are pessimistic about what the eventual outcome now. there's a lot of second-guessing, people want to go back two years, let the country default. cut all of its debt out and maybe that would have been a better solution, because this
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will be tough to get through. in the united states, a new watchdog reports says the federal housing finance agency must do a better job limiting legal expenses paid by fannie and freddie to former executives facie ining lawsuits. the reports finds the two gses have paid $109 million for legal expenses for the former executives. and the government's new consumer watchdog agency is launching a probe into overdraft fees charged by big banks. the cfpb says it will also ask banks for information about how overdraft fees affect consumers, how overdraft protection is marketed and what information consumers receive. you got that? what is it -- cpfb. >> we're going to be saying it a lot. >> you want to check the box for the overdraft fee? >> well they may require to you check a box when you sign up for the card or your account.
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that says i'm willing to pay this fee. that's how this is going to work. >> if it was an overdraft. >> if you overdraft. >> meaning you check the box in advance. and it would be an acknowledgement, whatever, but you would be forced to check the box and the idea is that -- >> an educated consumer would say, okay i'm checking the box or i'm not checking the box. >> if you don't check the box, you don't get the card. >> you might get the card, you wouldn't have the overdraft protection. i think i believe that's what's at issue. >> wouldn't you -- >> more small fine print. >> don't you just -- dock jeeves if he allows your account to get down to a level where there's an overdraft. wouldn't that be his fault he's written too many checks and not moved the cash around. 1%ers don't get overdrafts, do you? >> i have a different guy who handles that. jeeves, he has a gas card,
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jeeves. but beyond that -- by the way, you know the view eers think the is a real jeeves. >> he only flies the helicopter. >> there is no helicopter. >> i hope people appreciate the joke. >> who is that? >> that's a great guy in audio. >> tom lee and allison deans are both -- here to talk. >> about the dow jones industrial average. >> did they get here on helicopter? >> we broke through the 1,000 yesterday. >> but only briefly for a moment. >> first time since may of '08. tom lee is the chief equity strategist at jp morgan and allison deens is a cnbc contributor. tom, have you ever broken out into a cold sweat over the last year and a half as you're bullish stance has been tested.
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but vindicated once again? be honest, have you ever thought maybe you could be wrong? >> yeah. i mean i would say last fall, a few clients thought we were flinching a little bit. because the market was under intense pressure. >> a couple of times, you did twitch a little. but you would have to, right? >> yeah. >> but you know, i think it comes back to something from march of 2009, it's the birth of a pretty significant bull market. >> a secular bull market since '09. >> it's not a cyclical, cyclical bulls would have ended last year. that's why a lot of people were doing the death watch on the market. about you now as we're approaching the old highs, it's telling us the market can run for another two or three years further and set some new highs. >> once you say, once you posit secular bull market, we need to decide from previous secular bull markets, what type of price
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objective is possible and we already heard your possible duration. another two or three years. what type of, of upside objective would a secular bull market imply? >> well you know, ultimately bull markets end when you know everyone has been repositioned. nd everyone owns stocks and the valuations don't justify it companies don't generate enough profits to justify the valuations. i think that means you would be in the mid to high teens on p.e. and earnings per share, you know, two years out, say 2014 could easily be the 120 range. we're well into the s&p on the 2,000-ish level. before you have to worry about the bull market. >> what are we up since october, allison? are we up -- i'm looking for 30%. i don't know whether i can get it on a calendar year. so i've started saying that i was predicting it in october. is anyone going to remember that
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i didn't start in october? do you think we're headed higher like tom in. >> yes, i do think we're headed higher. i'm not sure i'm going to stick with the secular bull market, but i think the reason why the market is going higher is a lot of the concerns that were keeping people out of the market seem to be abating. so global economic growth, while not robust, it doesn't look like the u.s. is going to go into recession. it looks as if asia in trying to manage a slowdown, isn't going to have a hard landing. at the same time that there isn't going to be hyperinflation in china and while europe still poses a threat, it seems to be diminishing or at least they're buying themselves time. with all of that going on, the market might be more comfortable in acknowledging the positive surprises that the healthy corporate profit growth and affording the market a higher multiple. >> so what would your upside potential be, do you think, allison? are you willing to give us an idea in the next two years, let's say? >> you know, my sense is we could be 10% to 15% upside in
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the market the next two years. seeing the market multiple, 13 1/2 times earnings, moving to 14 1/2 to 15 times, at the same time i see corporate profit growth around 6% to 8%. that gets you roughly 12% to 15% market upside over the next two years. >> what could possibly finally get you to change your mind, tom lee? >> you know, i think that one of the things that we know has always really ended bull markets has been inflationary pressures or an exogenous shock. oil, i don't know if it's at 130 or 150, but already at this level of oil, gasoline is about 3.5% of disposable income. the nearest threat i think right now is oil prices. >> oil prices are getting everybody's attention at this point. allison, that could translate
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into gdp problems, employment problems. i mean is that the wild card? >> i think that's the wild card. while we're feeling a bill better about europe, that could fall apart and you could have some type of bank crisis. and bank crises tend to pull down global markets. so that's a risk. and something more explosive happening in the middle east could be an issue as well. >> tom lee, thanks, allison deans, good to see you. comments, questions about anything you see, email us light brown shoes with a dark blue suit. i looked it up in "gq" people were raving about that selection. >> i've been getting tweets. people want to know who makes the shoes. i got tweets about who makes the sweater. there are people who want to know this stuff. they think it's fashion. >> old men think it's crazy. >> this was an argument during,or a discussion during one of the commercial breaks, joe looked it up. to find out what "gq" had to
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say. >> dark brown. >> not tan shoes with a blue suit. that's crazy. >> i'm not wearing a blue suit. >> okay, great. but you do do. >> i will occasionally do that. >> there's an age difference for this. >> well that's low. that's a low blow. isn't it? >> that's what it said. >> i have no comment. >> i want viewers to tell me -- light brown with a blue suit is okay. all right? >> "gq" is on your side with the light brown. >> i have to go get more ammunition. overregulated america, this week's "economist" cover story looks at u.s. business editor and bureau chief matthew bishop joins us after the break. coming up friday on "squawk box," a cnbc exclusive. treasury secretary, timothy geithner, sits down with steve liesman to talk about the budget, the economy, europe,
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corporate tax reform and more. that's live from washington, this friday at 8:30 a.m. you know, typical alarm clock. i am so glad to get rid of it. just to be able to wake up in the morning on your own. that's a big accomplishment to me. i don't know how much money i need. but i know that whatever i have that's what i'm going to live within. ♪
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america is known as the land of the free. we should just mention that we're looking at my brown shoes with the gray suit. >> they're tan. >> you wear those with blue
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suits. >> and i'm going to invite "gq"'s style guy to give some advice. >> windsor knots, tie shoes. we're back to the shoes. but let's get -- let's get to matthew bishop. america is known as the land of the free. but from u.s. citizens to corporations, is the right to choose in jeopardy? those questions and more are covered in latest edition of "the economist" magazine. a very interesting cover story. joining us, matthew bishop, u.s. business editor for "the economist" what color of shoes are you wearing, before we go further, matthew? >> very traditional black shoes. i try to keep up with you, andrew, but it's just too hard. >> we're all trying. so matthew, this cover story suggests what i think some people already know or think, which is that the u.s. is overregulated. and yet, i'm curious whether you think it's -- how much, if we
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could quantify it, how much it's actually impacting the economy here. >> well, you know we look to all sorts of areas where regulation is over the top. he mean we're not against regulation per se. laissez-faire regulation has had its problems. but the response has been overkill. you look at something like dodd-frank, which was 848 pages long when it first came out and has now proliferated into thousands of questions it seems like. every bank, every financial institution is weighed down with dealing with bureaucracy. you look at the new health care reform which going to increase the number of official categories of illness and injury to from 18,000 to 140,000. you look at the environmental protection agency which makes a decision, gets reversed and there's challenges. ever are i time i talk to a business person there's a concern that the regulatory environment is killing at least 0 some extent the traditional risk-taking appetite and ability
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to take big bets that's made america great in the past. >> matthew every single person says look at how well corporations are doing right now. and they use that as a way to say that these, the corporate managers are lying about whether they're being impacted by it. they're just sort of, there's never a good time for regulation in a corporate manager's life. but as well as things are going in corporations, doesn't that indicate that regulations are not draconian at this point? >> you look at different parts of the economy. i mean i think firstly, a lot of companies responded to the crisis. by cutting back on jobs very aggressively. so they got their efficiency and productivity up. but they didn't actually invest in big projects that would generate more jobs over the long run. so you see all that money sitting on their balance sheet. you look at health care reform, which we still haven't seen come in and companies are still very nervous about what that's going to mean. there's a lot of uncertainty. dodd-frank again, only a
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fraction of dodd-frank is taking effect yet. so arguably its effects will be coming in and killing some of the risk-taking or at least pushing it out into the shadow-banking system over the next few years. >> i'm going to out you, matthew, because i know you've written one of these pieces that looks at dodd-frank and i imagine you are the new york correspondent who read all of dodd-frank. did you read every page of it? >> that particular article was led by tom easton, our correspondent. who has just come back from china and he said even the chinese think it's heavy-handed regulation. >> he when you get into the details, could it be done in less pages, and could it then be enforced? i mean one of the big questions is, you know, how do you actually write legislation that's then enforceable, which is you, if you set up a list of principles or sort of a broad outline, it becomes even harder to enforce ultimately. >> i think this is where
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business maybe protests too much. a lot of the problems that come as a result of regulation are a result of lobbying. as with the tax code, all the pressure force exemptions here, exemptions there, little tweaks to help a company that's helped a congressman. so the regulation becomes horribly messy. the volcker rule is the classic. volcker rule is to get investment banks to keep them from using fere ining federally funds. the original glass-steagall. but banks are being asked to answer 1200 questions to establish whether they're in compliance with the volcker rule which is costing small hedge funds $ 100,000 to go through the process of answering all the questions. so if there were less of this pernicious lobbying, business wouldn't be having this debate.
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we might have more better, more enforceable regulations. >> that's an argument for simplifying the tax code, too. there's news that we're examining the obama administration today to do something they lower the tax rate to 28% to 35% for the top tax rate. get rid a lot of the deductions, is that a good ideaor a bad idea. >> that's good idea, we've been arguing for that as the economist. generally the more we have one rule applying to all across the board. you know, he think you have much less loopholes, much less capacity for lobbying and actually everyone knows what the playing field is and you don't have all this complaint about regulatory uncertainty. >> it's better for small businesses, too, who don't have all the lobbyists and the people to go and try to find the loopholes. >> matthew, as the international man of mystery that you are, what's the right rate in terms of setting a benchmark that actually matches up and makes this country globally competitive? >> well i think the sort of rate
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that they're talking about, 28%, that certainly puts america back in the middle of the oecd numbers. and a lot of it, though, that point becomes about you know, do we believe that the business environment is going to be steady and predictable at that point? because when you calculate whether to invest in a country you're asking what's the tax rate going to be and what's the economic opportunity going to be. if you're very uncertain about the regulatory environment if you're very uncertain about where the economy is going, even with a very low tax rate you may not invest. think the obama people have got to do both sides, they've got to get the tax rate right and get more confidence in the business community, that there's long-term policy in place that they can rely on. so that when you make an economic bet, you feel you're not going to be second-guessed by the government. >> matthew bishop, great piece in the "economist." i'm saving you in a way. because joe chided me for a good -- i thought you were going to say 28 is too high.
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>> 28 is too high. >> arguing over the tax rate. >> you have a flatter tax. that's my point. you saw what the republican candidates are proposing. they're at 28, they're not at 25, they're down at 12.5. >> mitt romney is 15. >> i said republican. >> coming up, the "squawk box" trading bloc is standing by with how to play the latest market moves. and a special report, the iran threat. chief current brings us the latest on trade sanctions live from where the tension is building. "squawk box" has entered the twitter sphere. be sure to add andrew and becky to your list of must follows. andrew's handle, and ruersorkin.
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updates, "squawk box" on cnbc. and on twitter. without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity. [ ron ] when i was a kid i wanted to work with my hands, that was my thing. i really enjoy building turbines.
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it's nice to know that what you're building is gonna do something for the world. when people think of ge, they typically don't think about beer. a lot of people may not realize that the power needed to keep their budweiser cold and even to make their beer comes from turbines made right here. wait, so you guys make the beer? no, we make the power that makes the beer. so without you there'd be no bud? that's right. well, we like you. [ laughter ] ♪ my journey continues across the golden state, where everyone has been unbelievably nice. mornin'. i guess i'm helping them save hundreds on car insurance. it probably also doesn't hurt that i'm a world-famous advertising icon. cheers! i mean, who wouldn't want a piece of that? geico. ah... fifteen minutes could save you fifteen percent oh dear... or more on car insurance. all in one account. it's powerful, easy to use technology
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welcome back to squawk. are we starting with the shoes down here. among the stories we're following. one that won't surprise anyone driving a car. the energy department reporting
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a seven-cent a gallon jump in gasoline prices over the past week. the average price is $3.59, the highest since mid september. and america searches for energy alternatives, a new court ruling could impact energy producers. a state supreme court judge ruling that small towns in the state have the authority to ban hydraulic fracking, as well as other types of drilling within their borders. and another high-profile court case today, this one in china, computer maker proview has asked a court to ban sales of apple's ipad in shanghai. proview has been viewing so block ipad sales. claim it has the roo it to the ipad name. gold and the dollar joining us is anthony crasanti, the president of grg energy and the president of capital metal. why don't we start out talking about the dollar. the dollar has been getting more
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strength because of issues around the rest of the globe. you look for a safe haven. ha do you think about whether is the right play. is that where people should be going? >> i think when the dollar there's a bifurcation in the market. what the dollar is doing against the euro and what it's doing against the yen. the dollar has val idea based on the ltro. and what it's done against the yen, the bank of japan looking to monetize their debt. on the heels of the bullish nonfarm payroll numbers. >> the numbers in china were interesting. earlier this morning, we had a note that said that the weakness you saw in the chinese number is not an indication of weakness in china, but an indication of weakness around the globe. we talked to another analyst though said not necessarily, that this is all part of of the chinese plan to move away from exports. what do you think? >> i think china is a big player in commodities. the perception of what the chinese economy is doing, we saw hot numbers from an inflation
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standpoint. i think that net-net, china will end up having a strong second half to the year. but overall, when it comes to gold, china has been a big part of the market. they'll continue accumulating gold and that's why i see gold going higher. >> at some point, it seems like the momentum has been lost from the gold play. it hasn't come back. but you saw a massive runoff and then it's not the type of number that we watchry day any more. it's not where a lot of the action has gone. >> i think after gold hit the 1920 level on a although of the sovereign debt concerns we saw in august, 1925, gold has built a nice base. in september it had a sell-down. a healthy technical correction. looking now, there is a very accommodating policy around the globe. we saw the bank of turkey yesterday cut rates, looking at the bank of japan. even with china dropping their reserve ratio requirement, we're seeing a very accommodative global central bank community out there. and that does, i think serve as a nice center, it can be nice for gold to rally higher and
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ultimately make new highs. >> you can talk about 1750 or 18 00 being a nice consolidation nlgs you look back a year and realize it was 1350 and or look back ten years and realize it was well below 500. we've seen gains that have been set in and you're going to be pulling back as you see kmis around the globe at least pull out of that tailspin that they've been in? >> the thing about gold, we're talking about a market that's a ten-year bull market. ten-year bull markets don't end with a will per, they end with a bang and i see gold going north of $2,000. if you want to look at the public out there, there's a lot of underexposure in the gold market within the hedge fund and global macro community it's still a popular trade. it's rallied nicely. while gold priced in dollars as back in 1925, gold priced in euros is still close to all-time highs, i think at 1326 right now. so if gold can break out to new highs in euros and break out to new highs in the japanese yen,
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it's promising for gold within a basket of g-7 currencies. >> anthony, let's talk about oil prices, back above 106 a barrel. what's the driving factor here? is it the tensions in the middle east? is it what's happening with iran, the concern about israel? is there anything that has anything to do with supply and demand any more? >> not really. it is the tensions in the middle east. because when you look at a trading standpoint of the oil markets, bad economies around the world, you look at less demand in gasoline, you would say this market is a short. but that being said, really is iran, iran's hostility towards europe and the perception of iran and the preemptive strike of iran cutting off the oil supplies to europe before they can do it to them and iran comes out with a statement yesterday saying if they feel threatened, they'll attack first. all of this is really what's driving this. and really it's driving the brunt and pulling the wti higher. >> what's the price for oil if
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you didn't have these tensions? >> i would say $10 to $15 lower from where it is now. >> that's all? >> yes, because you have kind of a weaker dollar and you definitely do have some demand inches. but you do are some refinery problems that are causing the products to rally. and the products are pulling up the crude oil contract itself. >> we are heading into the driving season and we do traditionally see prices head up at that point. if you start to see oil prices, or prices at the pump push well above $4 a gallon, is that where you start to see some demand destruction? >> i think you know, people are kind of used to $4 a gallon now. this happens every spring because we have the turnover from the winter contract into the summer gasoline contract. so that adds about 20 cents to the gallon. as it is right now. but i think people are kind of used to the $4 a gallon for gas. and really, i think it would be more like $4.50, $4.75, then you'll see real destruction in the economy. >> anthony, john, gentlemen,
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thank you very much. coming up, israel under huge pressure to hold off on attacking iran 0 over its disputed drive for nuclear weapons, we'll go live to both countries next for a look at the political pressure that's building overseas. "squawk box" is coming right back. later this week, squawk is bird-watching. thursday, dallas federal reserve president, and ceo, richard fisher. on friday st. louis federal reserve president and ceo, james bullard is our guest. we calculate the fed's next move and get an insider view on policy and outlook. hawks, doves, squawk. later this week right here. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen.
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back on this wednesday, checking futures right now. you can see we are looking, well, slightly down. but more importantly, we have a new board to show you. and we're very excited to show you this.
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we're adding it to the mix. check this out. the last column show the implied percentage open. in other words, if the market opened right now, the dow would be off .06%. and nasdaq, this is part of the real way to be viewing this. i know there's a lot, there's too much math being done for you. joe looks very disturbed. >> why did you change it? >> i have to tell you i can't claim credit for this new element. >> i like 0 know the number of points. >> you like to know the number of points. >> this way you get both. you get to see the number of points plus the percentage. >> i was looking at the right. okay. >> are you okay with that? >> it's busy, it's a little busy. >> it changes, it doesn't -- it's not busy, it's same board, just a new board. >> are you okay. i know where it came from, but -- >> where did it come from? >> no. >> no, it's not, you can't put it on me. >> management types? >> you should love it.
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>> it sounds good. >> i think we're on board. >> good way to do it, i think. >> good way to do it. it's clearer. >> much smarter, thoughtful. >> cleaner. >> more accurate. >> by the way, there's one report on interest on the economic calendar today, we have existing home sales that come out at 10:00 a.m. eastern. forecasters are looking for a slight increase in sales compared to the prior month. also israel under huge pressure to try to avoid an attack on iran over nuclear ambitions. tehran says its nuclear course will not change, despite new sanctions. joining us live from jerusalem is our chief international correspondent, michelle caruso cabrera. >> one of the highest-ranking members of the israeli government says iran is working on capability not just to strike israel, but to strike the united states. he is the minister of finance, but he has extensive military experience. he told us this morning that he
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thinks iran could strike the east coast of the united states, within two to three years. >> they're working now and investing billions of dollars, in order to develop intercontinental ballistic missiles. we estimate within two to three years, they will have the first intercontinental ballistic missiles that can reach the east coast of america. so their aim is clearly not only to be able to threaten israel and the middle east, but to put a direct nuclear ballistic threat to europe and to the united states of america. >> it was just this month that iran launched domestically an satellite. and experts say the technology necessary to launch a satellite is very similar to that which you would need to launch an intercontinental ballistic missile. hence why we're hearing more of this talk about whether or not the united states could also be
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at risk from a nuclear iran. we spoke last night with the former head of the, former chief of staff, which is the highest-ranking member of the israeli military, a former general and former chief of staff, the highest-ranking position when it comes to the israeli army and extremely significant when it comes to the government. he's now chief of an israeli energy company. we'll talk about that later. in the meantime we asked him about the security situation here and here's what he said. >> you've had access to intelligence for a long time. the current iranian leadership, sane? rational or not? >> i really don't know. but what i do know, we cannot trust the regime that, you know, regularly call for the elimination and destruction of israel. i think we have to take it seriously. >> we have spent a lot of time speaking with many israeli businesses and business people here. and most of them tell us that they are just trying to continue
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working as if the situation were the same. they are used to threats and they don't want to change any kind of work patterns or anything to make the situation worse. they're trying to conduct business as usual. guys, back to you. >> michelle, stay there, we'll going to expand this conversation by bringing in ali ruzi that joins us from iran. >> the mood is jettery here, people are worried about an imminent strike by iran or the united states. but iran is remaining defiant in the face of the pressure. the supreme leader, the final authority in the country said iran wasn't going to move one iota on its nuclear part. it was going to forge ahead, despite talks breaking down with a high-level iaa delegation that was here yesterday. they left in the early hours of this morning, saying they had a brick wall. the talks were going nowhere. which might have an effect on future nuclear talks, with the
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p-5 plus-1. things tense here. and a senior commander of the revolutionary guard said yesterday if the iranian national interests were even threatened, iran would launch a preemptive strike on enemies. so iran isn't showing any signs of backing down. one thing we mustn't lose sight of is that the sanctions are having an effect. the ordinary iranian is suffering. the economy has become very, very expensive and inflation has gone through the roof. and internally, the economy is crumbling, too. separate from the sanctions. so the ordinary person is feeling the pressure. but the government doesn't want to show that at all. back to you. >> ali, who does the ordinary citizen blame for that discomfort that they're feeling right now? >> well it's difficult to get the word from the man on the street. it's a very closed environment here. it's a dual aspect blame. this face-off with the west, people say isn't helping every day person here. and obviously you know, you ask
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hard-line people in the country, they'll blame israel and the united states. they're saying they're putting undue amount of pressure on iran and iran has its own rights. and they're ignoring these rights. so it really depends who you ask. but there's blame being spread all over the place by ordinary people here. because they're finding the situation in the country very, very tough right now. i mean the average salary in iran is about $400 a month. and a kilo of meat here has become $25. so you can imagine, you know, the average guy can't even buy himself a kilo of meat in a month with his salary. >> michelle, obviously israel is a nation that is used to being under siege. what's the feeling on the street there? is the same amount of tension? has it increased dramatically? >> you know, you don't see it in the paper every day. you don't see people extremely nervous. you ask them about it, we have spoken with one investment firm that says they are getting questions from investors. but they do agree, they believe that this time the sanctions really are having an impact. for the simple reason that letters of credit, so
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instrumental to international trade, aren't being given to iran in any way. so in some ways the country has been reduced to trying to barter oil for rice for example. because the ability to actually exchange money has become incredibly difficult for the country. >> michelle, ali, i would like to thank you both very much for your time and michelle, we'll be checking in with you throughout the day from jerusalem. up next, stocks -- why do you look at me like that i thought they might say thank you, i was going to go back and forth. up next, stocks you need to watch ahead of today's open, including navigation device maker, garmin, finding its way to higher ground after its quarterly earnings. this, joe, is going off the rails. "squawk box" is hopefully returning after the break. the bulls charge ahead. investors taking aim at dow 13,000. but is this market getting a little oversold? one of wall street's most powerful women talks about
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what's changed. and where this market is headed. meredith whitney is our special guest, starting at 8:00 a.m. eastern. stick around, more "squawk box" after the break. you want to know where you are,, and where you'd like to be. we know you'd like to see the same information your advisor does so you can get a deeper understanding of what's going on with your portfolio. we know all this because we asked you, and what we heard helped us create pnc wealth insight, a smarter way to work with your pnc advisor, so you can make better decisions and live achievement. to find you a great deal, even if it's not with us. [ ding ] oh, that's helpful! well, our company does that, too. actually, we invented that.
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it's like a sauna in here. helping you save, even if it's not with us -- now, that's progressive! call or click today. no mas pantalones!
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let's take a look at some spots to watch. stocks to watch. of which there are a few. we talk about one is garmin. which was reporting 85 cents, which is way above expectations. which were 64 cents. you can see that's going to trade at a new fresh -- >> this was a company that was left for dead. >> it was. revenue is $909 million. versus an estimate of $761. >> it doesn't say -- i mean in terms of the breakdown, in terms of from the actual device's hardware and how much software. so much of their business has moved to the iphone. people buying the app as opposed to these devices themselves. >> the guidance was better for the fiscal year, 245 to 260, 249 was estimate, revenue goes up, 27 to 28. a dollar tree reported fourth quarter net of $1.60. two cents above expectations on better-than-expected revenue. just slightly better than
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expected. the guidance is in line. maybe a little bit lower. first quarter guidance, 91 to 9 7, versus 98-cent guidance. dell we've been talking profits were a penny short of 51 cents a share. some people talked about the guidance for the current quarter a little bit downbeat. downgraded to neutral from buy at citigroup. the target price was cut, that's a big hair cut. but it's made a nice move in recent months. chico's, f.a.s., fourth quarter was four cents above expectations. folk art specialties. >> i was going to ask you what that was. folk art specialties. >> the store has come a long way with that. >> folk, it's like plucking that chicken. i did that for someone again. said, do you really say that without fear? >> you like walking that line. >> when i don't think it's hard to say, plucking that chicken. >> i've had my own issues. >> you won't even attempt to say it. well, you have with your recent's peanuts.
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>> reese's peanut butter cups. >> she had a problem with that. and we've had people, bill griffith, floppy dicks, he tried to say who floppy discs. >> you said all of these issues. you say -- >> you're allowed to say this stuff. >> you're allowed to say this stuff. >> but you can't say what ernie enasta said. you would get fired for saying that. i think. >> say it. >> i'm not. >> i'm not done. >> you got more on the stocks to watch. >> i would love to hear more. >> intuit registered an earnings beat by posting 51 cents a share. six cents ahead of expectations. i have brocade, yeah -- >> 20 cents a share. seven cents above expectations, it's a -- cheesecake factory, 53 cents was above, a penny above. >> when was the last time you were at a cheesecake factory?
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>> it's been a long time. >> i've not ever been. every time i've been there's been a massive line and we ended up having to go to somewhere else. >> walmart, cheesecake factory. >> on my bucket list. >> big portions. >> i'm looking forward to it. >> i'll take you to one for lunch. >> you could diet or cut down on portions and cheesecake factory you are violating everything sacred in dieting. >> how many entrees would we have? >> one. >> and we would share them. >> aren't you supposed to have the whole thing and just -- >> you know they have like 42 different types of cheesecake. they have like white chocolate truffle. >> if you were groundhog day, if you were bill murray, remember when he was eating that stuff, you would go to cheesecake factory -- >> who is here? >> oh, meredith is here, good. she's going to do the walk.
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>> she's going to do the walk. >> the walk of fame in this case. >> the absolute walk of fame. should we start the walk now? >> you, she's ready. >> finally, we're all ready. >> ready for the walk. coming up, one of the most influential women on wall street, a big friend of the show. she joins us for remainder of the broadcast, meredith whitney on financials and muni bonds and more after the break. monday, february 27th -- the oracle of omaha answers your emails. in buffett's first interview after the release of his annual letter to shareholders. send your questions or comments to business news and warren buffett only on "squawk box," monday morning, beginning at 6:00 a.m. eastern. ♪
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what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. an hour of "squawk box" you don't want to miss, two "squawk box" masters of the market. >> we'll talk banks and muni bonds with one of the most powerful women on wall street. meredith whitney will be our guest host. tech investing and venture capital. ann windblat will join us at
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10:00 a.m. eastern. the third hour of "squawk box" begins right now. ♪ ♪ welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin. the dow again close to the psychologically important 13,000 level. u.s. equity futures at it hour. indicated just a slightly lower open. it would be nice to know what that is on a percentage basis. oh -- wow. oh, man, people if you were wondering now you know. it's .06%, andrew. >> a big move. >> it was not your move. >> it's not my move but it's a brilliant move. by a brilliant man, who came up with this update whose board -- it's been taken away. >> i feel very given who it is,
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i i'm okay with that. >> it's a collaboration. >> a team effort. among the top stories we're following, ford reporting $3.8 million into its global pension plan, doubling cash contribution. the automaker is going to be investing its plant assets more heavily in bonds as it moves to minimize pension risks in a shaky market. ford said it expected pension assets to match future benefit obligations in the next few years. as we've been mentioning, the obama administration is set to release corporate tax plan today. it's going to be proposing lowering the current 35% corporate tax rate to 28%. but taxes overall would likely rise as the administration wants to eliminate popular deductions, loopholes and subsidies and the administration proposes a minimum tax on overseas profits from companies. and lawmakers will debate emergency legislation to improve the country's private debt
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relief deal and unions are planning a rally outside the parliament. greece secured a second bailout worth $172 billion in exchange for new austerity measures and debt worries in hungary, the eu saying it wants to with hold, $655 million in funds from hungary because the country hasn't done enough to bring down its budget deficit. european equities are down across the board this morning. you can look there. also, let's take a look at the euro. you know, this is -- making the trip to paris a little more expensive. just slightly. >> okay. >> our guest host for the next hour is one of the most powerful women on wall street. joining us now, meredith whitney, she is the founder and ceo of the meredith whitney advisory group. i know you have a new report out on the health of the u.s. consumer. you say that consumer spending has been very strong and is likely to continue throughout the course of the year.
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but you say there are some real portions of strain. you want to lay that out for us, what you're seeing? >> what you've seen over the last several years has been the high end consumer, the high-income consumer has dominated more of the spending, the total spending and that's up 10% in last few years. so over 54% of total spending is done by the high-end. and they're moving along. they're the wunones that benefi from the low rate environment, they benefit from the stock market resurgence. but the other folks, you have to have assets to benefit from low rates, the folks that are compromised are the middle class, that have been debanked and cut out of the credit system. so $2 trillion in tread it lines have been cut since the peak of the credit crisis. and if you don't have credit it's a big adjustment factor in terms of getting used to a noncredit world. 9 0% of americans revolve at least one time a year. revolve their credit card lines, over 50% revolve every single month. so if you're being restricted as what you use as a cash flow vehicle, you have less spending
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power. so it's somewhat of a, a false indicator to look at consumer spending and say all consumers are doing so much better. you haven't had substantive wage growth and you see the contraction and available credit for mainstream america take real toll. and we forget that home equity, lending fuelled not just student lending, but just almost all lending, because it was the cheapest, most tax-efficient way to borrow. and you've seen 25% of the home equity lines cut from the system. >> people would say that that's a good thing. that people using their homes as a piggy bank was part of what got us into that trouble to begin with. >> i'm not making any judgment calls whether it's a good thing or a bad thing. but the adjustment factor is a painful thing and it's a long time coming. so if you look at spending as an example and where spending is the most compromised, surprisingly it's in areas that fuelled the economy for the last 15, 20 years. california, you have a slowdown
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this spending in california because you have on a per cap that basis, more than two times the consumer debt that you have in texas. the texas economy is booming. you have much more flexibility when you don't owe and when you have more credit lines available to you. >> and we're seeing it play out even in walmart's numbers yesterday. which were weaker than expected in terms of sales and revenue. part of it has to be because of the competition there. is it also because their consumers are getting hit so hard? >> i don't know specifically with walmart. you could argue that its company-specific inventory-related where they have too little on the shelves, they're not restocking their shelves. but clearly you see the biggest spend portion on groceries, gas mitigated a little bit. because gas prices declined in the fourth quarter. but their kmr customer is absoly compromised. the retailer that's doing well is the dollar stores, the dollar
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generals because that's capturing the low end who really didn't benefit from a housing boom. and isn't compromised from a housing bust. they're spending what they've always spentth and that's a third of the population. i think what's going to be most disturbing over the next several years is this issue where fewer americans are getting access to the traditional financial system. and that is going to slow down the spend power for so many americans. so we call it debanking or unbanked. >> you've talked with us about this before. you warned that this was coming with regulation on the banks and the crackdown. >> i think regulation has been one of the biggest, biggest drivers of debanked over the last several years. so when i started looking at the issue in 2005, i estimated that about one in, one in four americans would lived outside of the banking system. i think it's closer to one in three today. and that's because you know, you've got news on consumer protection today. that's because it's more difficult for banks to price for risk. so if you have a credit card
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loan, it's an unsecured loan and i want to actually watch you, almost put a low jack on you to monitor where you're going, how your behavior is changing. you know, so i can reprice. since the card act was enacted in 2008, i have to give you 45 days' notice to reprice. so some of this was good. but the unintended consequences is, it's really squeezing the middle end. and i think that you're going to see more and more people live outside the system and when that happens, it becomes so much more expensive to operate. so former head of financials at walmart actually told me that when she spent time with a customer one day, the expense of driving to pay her insurance bill, driving to pay her rent, all during lunchhour, then compromised the employees' ability to get back to work on time. it slows down the entire commerce system. and we're living with it. you know, the pendulum swings to too much regulation, and it squeezes out the system. >> wouldn't electronic banking
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solve all this stuff? >> well you got to have money in the bank to be an electronic banker. >> when you say people are debanked, ultimately -- >> they can't get an account. >> but won't they use some other -- >> what they're using now is what's now going to be under scrutiny from the new regulator, is check-cashing. you go into, you don't have a jp morgan account and your check isn't from jp morgan. jp morgan won't cash your check, but walmart will and check-cashers will. or people are using prepaid, which is borrowing from yourself. or people are using alternative measures, payday lenders. which when i looked at, i used to have a glamorous job of going and doing all of these visits, so this is dated, but ten years ago, 12 years ago when i would go see payday lenders, their security deposit was a polaroid picture of a consumer. because the consumer came back so often to go back and get a payday advance.
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but the relationship was positive. they knew what they were, they knew what they were paying, they just needed the dough. more and more people are going to find themselves outside the financial system. same thing happened in japan in the '90s. >> and ha does that mean overall for the economy? >> it means that you have to count on, you have to believe that the high end is going to remain bulletproof and keep powering ahead. and you know, that's it will work this year. i don't know how long it works on a go-forward basis. from the tax standpoint, the tax changes are going to affect a lot of that. and you know, high-end is more i think sensitive to the swings in the market. the low end is not going to carry any weight. >> why don't we talk a little bit municipal bonds. that's a call that was received so much attention because "60 minutes" picked it up and we've got into the having aries of the call and into the nuances where
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meredith whitney said the municipal bond market was going to fall apart and you shouldn't put any money there. you've explained in the past that's not your view. why don't you lay out where you see the bond market right now and what's going do happen with municipal bonds in particular? >> the market is, you know, has rebounded from last year's level. but remember, last year issuance was down by a third. you had a real contraction in supply and a tight correlation with treasury. so the market did better because of -- >> people made -- >> supply-demand issue. and i don't think i ever made a call to say don't money in municipals. the reality is that the municipal market is i think a danger zone and municipal finances are a big danger zone. >> were you surprised by the swing in munis? >> i was surprised by swings both ways. i was surprised by the reaction from the "60 minutes" interview that there was such a, a huge reaction. clearly, this is something people see in their communities
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and can relate to. and see on an anecdotal basis every day. if it was just taking my word for it, i don't think you would of seen a reaction that strong. you know budgets in schools are getting cut. you know transportation money is getting cut. you know social services on every level are getting cut. and you see in the newspaper, i mean every day in "the new york times," there's an article on struggling municipals. so it's not that -- >> you're not moving away from the broader call. in fact i think the news is out this morning that you're writing a book about this. >> i am. >> called "downgraded." >> i am. >> in your view, it's a matter of time? >> yeah. i think for the last three and a half years i've spent so much time on this issue because i think it shapes the future of the american economy and shapes the future of migration in this country. spend power in this country. and it's such a powerful, you know, such a powerful topic that
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as an investor, it's of paramount importance. >> but investors made lot of money. >> look, the issue is so much bigger than the municipal bond market. and from my equity clients, they make a lot of money on these themes in terms of who has regional strength and weaknesses. what budget is cutting what program if you look at the performance of so many different industries they were impacted by the decisions made by state and local governments. >> i gave you a hard time once about, i said please don't become a stock market timer or stock picker. do you remember when we -- >> you give me a hard time all the time. >> but that was the dow was, and i'm not sure that you were making a call on the dow. but you fell back on the, that your expertise was consumers and how strapped consumers were. but i thought there was a point at where 9,000, you thought the stock market was grossly overvalue and that's when i was saying, please don't become a stock picker because rabbani, and david rosenberg, they're great at these macro issues with
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economics. but no one ever knows whether the stock market is cheap, undervalued, overvalued. it's so hard to call and i was appealing for you not to do it. were you not making a call at 9,000 that stocks were overpriced. >> we don't have a specific market call. >> were you dating that back then? >> because the consumer was so weak. >> that was the only thing i ever gave awe hard time. >> i'll give you an example of something that i am, that i'm not any good about, which is, which is related, which is the sentiment in terms of bank of america is a great bellweather not just for the financials, but for the market. so last year in the fall, stock was absolutely creamed, it went down to like almost, i think below $6. what justification was -- >> i thought you called that. i thought you were right about the banks having another downturn at some point. >> but a stock trading at 50% tangible? there was no justification. and so there was a correction, but to have a 47% move year-to-date? what's moving that? it's, i mean it's a correction.
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but these are swings that are just much more -- sentiment than anything else. >> fear and greed does incredible things. the pendulum swings so much further it should always sort of think about stocks more or less here instead of here and here. >> i'm a very cash under the mattress gal. so i look for fundamental trends and growth and then break-apart pieces in terms of how he can't manage the component parts. that's how i look at things. so from a market technical call or sentiment call, i'm no good at that. that's not how i've been trained and how i do my job. i'll defer to you next time. >> did you see these tongue-twisters? >> i did. >> are you willing to try one of those? >> no. >> i'll try it very slowly. >> chicken plucker is easy to say. >> i don't know if you saw the last bit where joe shows how fearless he is. >> i'm not the pheasant plucker, i'm the pheasant plucker's i'm only plucking pheasants because the pheasant plucker is late.
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>> people that pluck figures. >> i'm not the figure plucker -- >> wow. >> stop, stop. >> what "alice of wonderland" show that i just joined. >> is this a bank of america division. >> we're lucky to have her here for the rest of the hour. we'll get back to calls and talk more about what the consumer call means, broadly. coming up, words of wisdom from another "squawk" master of the market, we'll talk with ann winbalad, from hummer winbalad venture partners. monday, february 27th, the oracle of omaha answers your emails. it's buffett's first interview after his release of his annual letter to shareholders. send your questions or comments to or tweet it and include #askwarren.
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welcome back to "squawk
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box," our next guest is a member of the squawk master class and a force in silicon valley, her expertise, venture in investing, ann winblad is co-found irof hummer winblad venture investing. i know your expertise is in enterprise and hardware. but social media and the internet seem to be a hot item and i wanted to get your view, since i know wur going to have this facebook ipo sooner or later and you are in the valley. whether you think this is going to be a good deal. >> well actually, my expertise is in software and not hardware. so facebook is a software company. and a very good one. it really, the reach of facebook is unmatched. the reach not only to consumers, but to major brands. and certainly as we discovered from the filing, they have a very viable revenue model. and a very significant revenue
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growth model. i think it's going to be very successful. >> so you don't think we're in a bubble. when you look at groupon and zynga and the whole rest of them? link linkedin. >> the whole rest of them is quite a collection of companies and they're all very different. linkedin was early in the social networking arena. they're focused on the professional user. their business model is very different than facebook. so although they do support advertising, groupon is a whole different company. and i consider those companies of varying quality and of varying size, not a group that you would see as identical to each other. >> let's talk about the ipo market and the m&a market in terms of exits for so many of these investments. >> sure. >> right now clearly there's an opportunity for the facebooks of the world, but for some of the smaller players, it doesn't seem like there's an opportunity to exit in the ipo market the way there used to be.
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>> well there certainly isn't. i was the early investor in a company call eed hyperion was purchased by oracle for about $3 billion. we took that company public when it had about $25 million in revenue. it was the most successful ipo of 1995. you could never think about taking a $25 million company public today. so we're baking these companies longer. companies have to be nearing the $100 million revenue mark before they can be considered an ipo candidate. that means we're investors longer. but it doesn't mean that we're not building great companies in the background. >> but it must change your investment thesis then. >> we're early-stage investors, we start at the first-round called the a round. so our thesis does not change. and when we start, we're focused investors in software and in early-stage rounds what it does say is that we've really got to raise the bar in how big these
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companies can get. and can we really build $100 million companies in a reasonable period of time? our funds are only ten years in length. so certainly ten years is sort of about the longest time you can keep a company private or illiquid. although many companies that have gone public in the last couple of years are older than that. so it does raise the bar on the size of the market opportunity for the companies that we select. >> ann, we had, reed hastings, was that our guy last week? reed, was that who we had on? >> we had the other one on. >> the linkedin, hoffman. reed hoffman. i asked him, social media is like been everything for like three or four years. and i asked him, could he put his finger on the next really
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big thing or can we close down the patent office? like they did back in the 19th century. there was no more good ideas. is it going to be a continuation of social media start-ups that are knocking the cover off the wall? or can you tell me as a futurist what's going to be the next really big thing that i have no idea about. >> well it's our job is not to predict the future. but our job is to find the future. we have it look for patterns that are emerging with all the different technology changes. certainly social media will continue to be part of the landscape. but there will be, it will not be the new part of the landscape. there's a saying out here that data is the new oil. so the focus today is really on predictive analytics, what do we do with the data we're storing? what do we do with the data that's being created from companies like twitter or the social media companies. so the next big thing in our mind is really the growth of companies that can really bring
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value to the huge amounts of data that are being stored. that leverage the commoditization of storage and hardware itself. so data is the next big b.i.g. thing. >> but they have to be able to do it without infringing on privacy with all of the concerns we've seen with google recently, right, ann? >> that's correct. it does mean if you look at any large enterprise, much of the data that they have is data that they own. data sets they might purchase, or data that they're creating themselves from let's say you're a retailer, from your point of sale. from your own web properties. from your own twitter feeds. from the proprietary data from others. what do you do with this data? right now you store it and you look back on it this a category we call business intelligence. that's very different from companies like hyperion or business objects, are all acquired companies. how you predict the future with
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that data? how do you drive your company more intelligently? and how do you bring that intelligence down to the individual employee? >> ann winblad, thank you for joining us this morning. >> thank you. when we come back, more from our guest host, meredith whitney. but first, today's top stories, "squawk box" will be right back. s continually monitors blind spots, scans the road to reveal potential threats, even helps awaken its driver if he begins to doze. so in the blink of an eye it will have performed more active safety measures than most cars will in a lifetime. introducing the all-new 2012 m-class. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. take the privileged investing tools of wall street and make them simple, intuitive, and available to all. distill all that data.
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welcome back to "squawk" on this wednesday morning at 8:30, among the stories we're following, mortgage applications fell 2.5% according to new figures from the mortgage bankers association. both new home purchase application and refinancings fell with 30-year mortgage rates holding steady at 4%. in other housing news, luxury home builder toll brothers lost two cents a share for the first quarter. analysts had expected a two cent per share profit. the company citing contract cancellations. more from our guest host,
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meredith whitney. i would say anything that we talk about in breaks, that seems really important to us is probably really important. we were talking about ten-year a.r.m.s, and 30-years, let's talk about the bond market. >> a different bond market. >> what about the 2014 promise of not raising rates? what about 30-year versus ten-year. what's a bond investor to do? >> well it looks like the fed is almost evenly divided in terms of raising rates and not raising rates. low rates haven't moved the mortgage market. we had low rates and you have people that are boxed out of refinancing because of negative equity or they don't have enough money down or they don't qualify, period. so that's not the solution. and i think i mean i'm of the camp that rates should be higher. and not lower. but for whatever that's worth. >> if you're not getting anything for it, then why --
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>> you're not getting, you're also encouraging -- so many people to jam up on a short-term bas basis. >> it punishes the savers. >> that's the saddest thing in terms of the retirees, there's clearly a pension problem in this country, not being helped by low rates. but specific so mortgages, there's, it's fascinating in terms of what the banks have not done, to remedy the mortgage market and what the regulators have not done to remedy the mor mortgage market. the banks are being sued every which way they turn. but also the banks have not repriced the industry. so the banks have got to figure out a way that they can make pricing attractive to them and reasonable for the consumer. so effectively priced for risk. i'll tell you how perverse the market is you no he that a first mortgage has less risk than a second mortgage, right?
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but a second mortgage has been priced cheaper than the first mortgage, five out. last ten years. and is currently priced cheaper than a first mortgage. why? because the first is priced off of ten-year and the second is off of libor. it makes no sense, like the system has to change. the mortgage market, we're one of the only countries if no the the only country that works off of a 30-year mortgage. no other country that i can think of works off of a 30-year mortgage. >> doesn't japan have a 100-year mortgage or something at this point? >> japan has a booming housing market. canada and the uk, no one is working off of this archaic system. >> what's the longest mortgage you can get in canada? >> it's got to be under, ten, tops. >> ten tops? >> top of my head. i think it's around ten tops. i would say and they're all, they're all adjustable. so the idea is that we haven't had a housing policy until our last housing policy went bust. we have to have a national
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housing policy and we have to have banks work together to enable a system that works for our people. >> the policy should be what, then? >> the policy should be getting together and having effectively industry repricing. and an industry repricing and an understanding of basically, a normalization of the market. so you have, 95-plus percent of mortgages today are being backed by fannie and freddie. fannie and freddie are effectively subsidizing unprofitable mortgages that the banks wouldn't put on their balance sheet. that's not sustainable and ultimately the taxpayer is paying the bill for it. the banks used to price profitable loans and you know, they're a myriad of loan products that they're still not pricing for profits. and that's the regulators fault and it's the also the bank's fault. >> i wonder at this point, you could almost say that the policy
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by the federal reserve, which in your view, you know, the benefits are not being seen in some of the negative consequences, we don't know what they are but they might exist out there. and some of the stock market activities, some of the asset inflation that we're seeing might not be completely justified if you had a fed that wasn't quite so accommodating. >> you've mispriced assets everywhere. >> there's no doubt about it. the, because i think at the it's got to be so clear to every policy maker that the low rate environment is not helping anyone and it's not helping the system and it's just leading to other bubbles. that's a straightforward -- >> what's the fed to do. if they can't use the tools they've traditionally relied on to try to juice the economy and get things going along and they don't think there's going to be any help from congress and the administration because they
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can't agree on anything. if the economy doesn't turn and you're still looking at 2% to 2.5% growth and unemployment that's above 8%, are they supposed to just sit back and watch that at that point? >> i think the fed has done everything they could. and now the fed, people are looking at the fed as having all the answers and they can't have all the quick fixes. now we're getting into issues where you have to have policy, you have to have major policy changes. and i'll give you an example with the state. so there are 36 new governors that came into office in 2010. some have made some incredible changes and moves to try to remedy their own fiscal situation. and create jobs. indiana just went to right to work. ohio may go right to work. that clearly has been a proven job creator. but also, you're trying, you're seeing states sell assets, privatize assets, do public-private partnerships. that's being blocked by regulation. that creates jobs. i mean there is -- enormous amount of -- >> you got to push back.
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>> i can agree with her on certain things. >> the right to work states have been a proven job creator? come on, sic 'em. sic 'em. >> oklahoma is a case study for that. >> i can't push back on that. >> why not? come on, joe. >> that's why you're here. to push back on that. >> if i wasn't saying that the right to work state -- >> if i happen to be on vacation. >> you are here and i pay you for three hours, not for two. >> i'm not going to push back on that. >> you can't push back because you know the unemployment right is so much -- it has more to do with the fact that the u.s. economy was powered by the coast and now it's being powered by central and south that happen to be right to work states. you've got low unemployment rates, faster growth. spending is outpacing spending -- by 30%.
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>> i was thinking of my way in on the conversation. >> businesses are migrating -- >> you think that we're moving off the coast. >> there's no doubt about it. look at all of the silicon valley relocation, not in terms of headquarters, but in terms of new business development. it's going on in texas. i mean two years ago, a delegation of californians went to texas to learn best practices. >> if you were going to start a new business today, what state would you start it in? >> i would start it in texas. >> texas in. >> richard fisher is on tomorrow. >> he says things you can't -- for a federal reserve official, he says things about -- he says it has nothing to do with being oil and energy intensive. it has to do with regulatory, low taxes, tort reform. all of these things that you heard the business council come up with that were antithetical to everything the obama administration is trying to do. >> i wish now we could get ann
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winblad back. because -- now you -- >> i don't know how to read you, i give up. >> exactly right. so homestead act, limited the amount of leverage that texans could take on, therefore no one had an ltv, loan to value greater than 80%. today as i said, you see california debt loads per capita over two times that of texans. >> texas is helped out by the oil and gas. >> where i was going -- >> yes, it's been helped out. houston has 28 ports. i mean houston is one of the biggest exporters -- >> if you were the next mark zuckerberg sitting in your dorm room right now and you had great new idea, you're probably still going to silicon valley. you're going to california. >> i'm not a silicon valley gal. if i'm starting to business, i'm going to texas. >> texas is it? >> i just think that -- i'm not, i'm not sure, i think if we
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asked ann, she would say you would still show up in california. >> i would not stop at texas. because there are many other states that are attracting a lot of business. here's the problem that you have and i think here's the social migration issue that's a big deal. so states that like texas that have more money because they've got more business development, they've got stronger economies, now have the obligation to put more into their education systems. california, that has less money, because its budget and its fiscal situation has been so compromised is taking the most money of any state out of their education system. so it's going to be a long time coming. but you're going to see like california, who would go to, obviously people go to outstayed colleges. one of the best university systems, education systems in the country. that's going to change simply because of resources. >> would you start a business in new york? >> i have started a business in new york. >> maybe that's the answer, then. >> new york is not easy from a
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tax perspective at all. >> but in an odd way, that answers the question, right? you've decided to start the business in new york. >> i was in new york. >> right. it doesn't mean i would start my new business in new york. everyone is going to have to be, each state is going to be competing against each other. oklahoma is competing against texas. >> doesn't that prove that people are not as mobile as we think they are? >> there's always mobility. >> it could have been worse than new york, right? >> yeah. >> there's autonomous bermuda. >> there are also places, to start your business in new york makes the most sense, because of wall street and the connection. silicon valley, if you want to be around like-minded people and the venture capitalists you're going to pay a premium. >> i think you're going to silicon valley for the high quotient of engineers. it's a talent pool. and it always comes down to the talent pool. which is why states have to focus so much on investing in education. >> that's a good point.
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>> we're going to have more with meredith whitney. she's our guest host for the rest of the hour. when we come back, we'll be taking a look at some of the top stories, those that have been lighting up the "squawk" news wires this morning. we'll be back after a very quick break. [ male announcer ] the draw of the past is a powerful thing.
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welcome back to "squawk" on this wednesday morning. the futures right now looking, you can see them there, we're down about 15 moints. and the implied percentage open, this is new to the board, we'd be down about .12%. making headlines this morning, bank of america's merrill lynch launching a more aggress everybody recruiting campaign for top-tier brokers. among incentives, a bonus paid for transferring client assets after six months at the firm. merrill is offering brokers from other firms an up-front cash payment ecall to 150% of the fees and commission these generated during the prior
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12-month period. back to you. >> andrew, thank you. when we return we'll have more from our guest host today, meredith whitney and we'll be heading down to the new york stock exchange for the stock stories that the markets are watching as we head towards the opening move. later this week, "squawk" is bird-watching, thursday, dallas federal reserve president, and ceo, richard fisher. on friday, st. louis federal reserve president and ceo, james bullard is our guest. we calculate the fed's next move and get an insider view on policy and outlook. hawks, doves, "squawk," later this week right here on "squawk box."
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welcome back to "squawk box," right now you'll see the futures, slightly lower this morning. dow futures down by 10 points below fair value and s&p futures are off by two. we did see the futures cross or the dow cross above that key level of 13,000 yesterday. at least the key psychological level. it pulled back and ended at 12,965. so we'll take another run at it today. the implied percentage open as
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you can see is down just barely, down by 0.07% for the dow futures. a story that's just in, t-mobil is asking the fcc to to block -- from cable companies. t mobile says the deal would put an excessive amount of spectrum into verizon's hands. let's get down to the new york stock exchange. david, melissa and jim join ugh this morning. what do you think about this news just out with t mobile trying to block the purchase of the spectrum? >> not a big surprise they would try at least. they are really disadvantaged right now, becky. ed question for deutsche telecom is what do you do with t mobile? there are in fact people that expect we will find something in
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the perhaps not-too-distant future about the future of that wireless provider. this is just something they felt they needed to do to see if they could impede -- an important deal that got announced the end of last year that puts them in partnership with cable companies such as our apparently company comcast. they are also, of course, competitors in certainly markets. >> and randall stephenson, got that compensation package that they decided to take him to the woodshed on what would have been a huge coup? let's give him that, okay? it was worth a $4 billion ante? well -- >> he's still making quite a bit. >> yes. >> i don't think anybody's going to cry for him. >> compared to warren buffett, right? governor christie had kind words about warren buffett this morning enchts we saw that,
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basically shuts up and go away. >> don't you love that? >> he says that to a lot of people. >> if you want to write the -- >> he should wear a sign around her chest. >> shut up and -- >> i try to get mice kids to say shh or quiet time? >> i'm looking forward to hearing what he has to say. guys, we'll see you in just a few minutes, coming up at the top of the hour. in the meantime we'll get final those from our guest host meredith whitney. squawk is coming right back. "squawk box" is keeping the action packed with the biggest names in business. tomorrow steven roach and dallas fed president richard fisher, all at 6:00 eastern. with the ability to improve roi through seo all by cob.
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well cub back to "squawk box." quick programming note, on monday warren buffett will join us live, ready to answer your questions on "squawk box." he's got his annual her to shareholders coming out this friday. you can ask him questions about that. emaid those questions to you, or you can tweet your questions.
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if you tweet us make sure you use the hash tag askwarren. >> are you really sitting next to each other? >> yeah. >> i was joking. >> i mean -- i was talking about the picture. stock of the day is chico's reporting stronger than expected earnings and rent and strong demand for the pricier brands, offsetting -- has been the one and only meredith whitney. thank you for being here. we talked a lot about banking, but banks themselves. i'm curious, given the big downgraded call on citi, where you see citi today. >> um, i think citi's got a lot of money to invest in its infrastructure, you saw that in
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the fullback, so in terms of real operating leverage, i think that's something that plagues the big banks. remember, 80% of revenues over the last ten years in wall street revenues came from europe and the u.s., which are all deleverages, so that has an immediate and big impact on these businesses. you know, citi at 70% of tangible, will they create capital so much that it's going to be -- go to tangible or beyond that? i don't see it as different from any of the other big banks which i'm not that bullish on, because i would rather go into pure plays and to regions of growth. i think there's not a lot of growth. >> there's no big bank you're bullish on? >> i think wells fargo is expensive, but it has -- it's got great growth metrics. it doesn't have the capital markets exposure, you know, for better or worse, they have a capital markets division, but it's not so big inside the bank.
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you know, this may be a better or worse, a big consumer credit. credit looks good, they're powering ahead. >> we were talking about goldman sachs, and the "fortune" magazine, we had the reporter talked about whether -- your views on goldman? >> it's going to be as close to a pure play on global capital markets as you as you can get. year to date, volumes are terrible. so you've been equity volumes down over 50%, m & a stinks, wheres the light at the end of the tunnel? >> is it cyclical? >> it's been secular since the crisis. 40% are driven by financial -- that's 40% of the dead markets.
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no light at the end of the tunnel? >> eventually. they've got to resize the businesses. it's just that simple. >> we had an analyst on last week, who said he thought wells fargo was the best run banks. >> almost twice the valuation of other stocks. >> he said he would buy it as you see interest rates start to climb, because that's really when you hit the sweet spot -- >> you buy every bank before interest rates rise. >> he said wells fargo in particular is keyed into that because of their base of deposit. >> it's so asset sensitive, sure, but you could buy the entire index and probably get a better return than just buying one stock. >> do you have to -- how quickly do you have to move ahead of when -- i mean, if the fed says 2014 and people start to thing med 2013, how quickly would you have to move on that? >> probably six-month lead time, but i have no idea


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